I’m sure somebody out there is thinking something like “Certified mail only proves you mailed something, not the actual form.” All I can say is that certified mail receipts have always worked for me, including getting an erroneous $9,000+ penalty reversed on an extended partnership return just in the last year. (Why didn’t they e-file? The partnership had a short year because of a technical termination, and the IRS rejected the e-filed extension.)

Filing a gift tax return starts the three-year statute of limitations, even when there is no tax due, and it is worth the minimal hassle and expense, especially any time gifts other than cash or publicly traded securities are made, to make sure you aren’t fighting some stupid battle over a 2013 filing in 2050.

To be tax-exempt, booster clubs and similar groups have to meet the same requirements as other charities. That means a group must serve the public interest, and its earnings can’t benefit only a few people. That second requirement—known in tax law as “private inurement”—is where the Capital Gymnastics Booster Club tripped up.

I think people may be reading too much into this decision. The club involved had bad facts. From the Tax Court summary of the decision (my emphasis):

Membership in P was mandatory for the parents of athletes who wanted to participate on the teams that were operated out of that private gym, and each family paid to P an annual assessment to cover the athlete’s entry fees to compete in the meets and to offset the estimated expenditures for the coaches’ travel. The assessment ranged from $600 to $1,400 per athlete for FY 2003, depending on the athlete’s competitive level.

A typical high school athletic or band program might encourage booster club membership, but they don’t normally require it. Here it looks like they went too far by running all parent expenses through the club. That’s not the way I have seen it done with my kids’ activities. Given this decision, though, it would be helpful for the IRS to tell the zillions of parent-run booster clubs out there what is and isn’t allowed. Right now volunteer parents are just winging it as best they can.

This entry was posted
on Monday, September 16th, 2013 at 8:28 am and is filed under Tax Roundup.
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